Friday, February 27, 2004

Ja: Chinese demand for steel killing global industry

LOCAL steel prices continue to skyrocket as China's huge demand goes on unabated and world supplies become more scarce. Not a day goes by without an announced price increase or surcharge. This has had an undoubted affect on local prices, particularly bearing in mind the fact that Jamaica has to import most of its steel.

There is no foreseeable end to the present scenario and the situation appears sustainable for the following reasons:

The world supply and demand balance for steel is in the best shape it has been for at least 25 years.

China's demand continues to be strong and is pressuring that newly balanced global supply and demand.

The U.S. dollar has given U.S. mills significant pricing power against imports, which are necessary to fill the 20 per cent gap in the U.S. market that the U.S. mills cannot serve.

China's high demand for material has caused a shortage of ships in the world, causing international freight rates to increase 150 to 200 per cent.

U.S. demand has just begun to improve after three years of decline, and the rest of the world, except China, is also just beginning to see improved steel demand or a bottoming out in weakness.

Inflation rates globally remain low, which should forestall any tightening actions by central bankers who may be concerned about overheating.

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